One of my early millionaire mentors told me to always know my downside in any investment, business venture, career, etc. that I got involved in. When measuring risk, whether it’s changing jobs, starting a business, etc., a prudent person always looks at and contemplates the consequences of things not going according to their plans or projections.
If you don’t know your downside, then you risk losing everything when the unexpected happens. Remember the housing bust that started a few years ago; and that is still ongoing? How many friends or family do you know who are underwater in their mortgage, where they owe more money on the home than it is actually worth?
I spent the better part of a decade running a multimillion dollar real estate and mortgage company with my former business partners. We originated hundreds of millions of dollars in subprime loans over the years we were in business together. But those last few years from 2005 on, we got out of the business because our clients got priced right out of the market due to skyrocketing appreciation. People’s incomes did not go up, but the price of homes sold in many areas doubled. We had plenty of buyers, we just could no longer find any good homes at prices they could afford. I remember looking at the rate and mortgage term sheets that we got faxed to our office every day from the mortgage companies we brokered loans to. As the years leading up to the housing bust rolled on, the terms for qualification got easier and easier. I remember some programs that took the worst of the worst of the borrowers. I remember thinking to myself, “I can’t believe they’re willing to finance someone with this kind of credit score or credit history, but I guess these banks know what they’re doing.” Well, we all know how that ended.
By the time the market crashed in 2008, I had been out of the real estate business completely for over three years. When I was younger and looking ahead, I could have never imagined the real estate and mortgage boom that we lived through would be so lucrative. I also never imagined that I would see most of my friends and colleagues lose their massive real estate empires in a matter of a few short months. Decades of wealth wiped out in a matter of months. I never saw that coming. Back then I didn’t really understand how the world’s financial system worked like I do now. I also learned that the people in the mainstream media have absolutely no idea what the hell they’re talking about.
With the rise of the Internet, we are each able to directly connect to financial experts and investors who actually get most of their bets right. Kyle Bass, from Hayman Capital Management, is just one of the billionaire hedge fund guru’s I listen to. He’s a fascinating man. He made a lot of money on the subprime mortgage crash. He used to play the board game “Risk” when he was a kid, and that is how he became interested in the market and investing. He lives in Texas on a 41,000 s/f ranch surrounded by thousands of acres he owns. He’s also armed to the teeth. He’s a good old boy who believes in the Second Amendment. He also owns a similar style property in Costa Rica. His favorite philanthropy cause is wounded veterans. He has a bumper sticker on his car that says, “God Bless our troops, especially our snipers.” I always listen to what he has to say. Here is his latest worldwide financial forecast of what’s going on with the debt crisis, and what his firm’s next big financial bets are (There also is a MUST SEE hour long interview that was released the day after I originally published this article. Kyle goes thru all of the numbers, facts and the shocking details of what he sees coming. What he has learned by talking with the decision makers at the Fed, ECB, European Union, Congress, Obama Administration, & dozens of other government officials from all over the world. Its long at 107 minutes, but well worth your time. I would have embedded the video in this page for you to watch here, but embedding is disabled, and you must therefore watch it directly on YouTube. CLICK HERE to watch the video.)
“An investment in knowledge pays the best interest.”-Benjamin Franklin